<PAGE> 1
EXHIBIT 2
PROMISSORY NOTE
$2,166,666.67 November 6, 2000
1. PROMISE TO PAY.
FOR VALUE RECEIVED, BALANCED CARE CORPORATION, a Delaware
corporation ("MAKER"), which has its address at 1215 Manor Drive,
Mechanicsburg, Pennsylvania 17055, Attention: Clint Fegan, Chief Financial
Officer, promises to pay to the order of RH INVESTMENTS LIMITED, a Cayman
Islands corporation, and its successors and assigns ("HOLDER") the sum of Two
Million One Hundred and Sixty Six Thousand Six Hundred and Sixty Six Dollars
and Sixty Seven Cents ($2,166,666.67) ("THIS NOTE"), together with interest
thereon as hereinafter set forth, all payable in lawful money of the United
States of America (collectively, the "LOAN"). Payments shall be made to Holder
at Herengracht 483, 1017 BT, Amsterdam, Netherlands.
2. INTEREST.
So long as no Event of Default (as hereinafter defined) exists,
interest shall accrue on the principal balance hereof from time to time
outstanding and Maker shall pay interest thereon at a rate equal to twelve
percent (12%) per annum (the "INTEREST RATE"). Interest shall be calculated
based on a 360 day year and charged for the actual number of days elapsed.
3. PAYMENT.
(a) Provided that Holder has not advised Maker in writing that it wishes
Maker to pay interest in cash on an Interest Payment Date (as defined
below), accrued interest due under this Note shall be compounded on each
Interest Payment Date and such compounded interest shall thereafter be
added to and become part of, the principal amount due under this Note.
For the purposes of this Note the "Interest Payment Date" shall mean the
last day of each month commencing November 30, 2000 and ending on the
date all amounts payable under this Note are paid in full; and
(b) This Note shall be due and payable on or before January 31, 2001, or any
earlier date on which this Note shall be required to be paid in full,
whether by acceleration or otherwise (the "MATURITY DATE").
4. PREPAYMENT.
Maker may prepay this Note in full or in part at any time Maker
gives Holder at least five (5) days prior written notice thereof.
Page 21 of 60 Pages
<PAGE> 2
5. DEFAULT.
5.1. EVENTS OF DEFAULT.
Any of the following constitute an "event of default" under this Note (each an
"EVENT OF DEFAULT"); (a) the failure to pay any amounts owed pursuant to this
Note when due (other than the failure to pay interest when due, which will
become an Event of Default if not paid within ten (10) calendar days after
such payment is due); (b) the occurrence of an "Event of Default" as that
term is defined by that certain loan agreement dated as of December 30, 1999
by and among Heller Healthcare Finance, Inc. ("HELLER") and Maker, together
with the other parties identified therein, whether or not any such event of
default has been waived by Heller, and, for greater certainty, such definition
of "Events of Default" contained in such agreement is hereby incorporated by
reference in and made a part of this Note, regardless of whether such
agreement is modified, amended or terminated.
5.2. REMEDIES.
So long as an Event of Default remains outstanding: (a) interest
shall accrue at a rate equal to the Interest Rate plus four percent (4%) per
annum (the "DEFAULT RATE"), compounded monthly on the last day of each month
until all amounts payable under this Note are paid in full; (b) Holder may, at
its option and without notice (such notice being expressly waived), declare this
Note immediately due and payable; and (c) Holder may pursue all rights and
remedies available under any security held by Holder, including, without
limitation, the stock pledge agreement dated April 18, 2000 as amended by
agreement dated November 6, 2000 (the "STOCK PLEDGE"). Holder's rights, remedies
and powers, as provided in this Note and the Stock Pledge are cumulative and
concurrent, and may be pursued singly, successively or together against Maker,
any guarantor of the Loan, the security described in the Stock Pledge any other
security given at any time to secure the payment hereof, all at the sole
discretion of Holder. Additionally, Holder may resort to every other right or
remedy available at law or in equity without first exhausting the rights and
remedies contained herein, all in Holder's sole discretion. Failure of Holder,
for any period of time or on more than one occasion, to exercise its option to
accelerate the Maturity Date shall not constitute a waiver of the right to
exercise the same at any time during the continued existence of any Event of
Default or any subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Stock Pledge or any other security, whether or not legal proceedings
are thereafter instituted by Holder; (ii) to represent Holder in any bankruptcy
reorganization, receivership or other proceedings affecting creditors' rights
and involving a claim under this Note; (iii) to protect the liens of the Stock
Pledge or any other security; or (iv) in connection with seeking an
out-of-court workout or settlement of any of the foregoing, then Maker shall
pay to Holder all reasonable costs, attorneys' fees and expenses in connection
therewith, in addition to all other amounts due hereunder.
Page 22 of 60 Pages
<PAGE> 3
6. GOVERNING LAW; SEVERABILITY.
This Note shall be governed by and construed in accordance with
the internal laws of the State of Pennsylvania. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair the
validity, legality or enforceability of the remainder of this Note, and to
this end, the provisions of this Note are declared to be severable.
7. WAIVER.
Maker, for itself and all endorsers, guarantors and sureties of
this Note, and their respective heirs, legal representatives, successors and
assigns, hereby waives presentment for payment, demand, notice of nonpayment,
notice of dishonor, protest of any dishonor, notice of protest and protest of
this Note, and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note, and agrees
that their respective liability shall be unconditional and shall not be in
any, manner affected by any indulgence, extension of time, renewal, waiver or
modification granted or consented to by Holder. Maker, for itself and all
endorsers, guarantors and sureties of this Note and their respective heirs,
legal representatives, successors and assigns, hereby consents to every
extension of time, renewal, waiver or modification that may be granted by
Holder with respect to the payment or other provisions of this Note, and
to the release of any makers, endorsers, guarantors or sureties, and their
heirs, legal representatives, successors and assigns, and of any collateral
given to secure the payment hereof, or any part hereof, with or without
substitution, and agrees that additional makers, endorsers, guarantors or
sureties and their heirs, legal representatives, successors and assigns, may
become parties hereto without notice to Maker or to any endorser, guarantor
or surety and without affecting the liability of any of them.
8. SECURITY, APPLICATION OF PAYMENTS.
This Note is secured by the liens, encumbrances and obligations
created hereby and by the security interest created in the Stock Pledge. As
further security for its obligations under this Note, Maker agrees to pledge
all of the issued and outstanding shares in the capital of each of the owners
of properties owned directly or indirectly by Maker to the extent same have
not already been pledged pursuant to the Stock Pledge in a form satisfactory
to Holder. Payments will be applied, at Holder's option, first to interest
due on this Note, and second to the outstanding principal balance of this Note
provided, that all interest on and the entire principal amount of this Note may
be prepaid at any time subject to Section 4 of this Note.
9. MISCELLANEOUS.
9.1. AMENDMENTS.
This Note may not be terminated or amended orally, but only by a
termination amendment in writing signed by Holder and Maker.
Page 23 of 60 Pages
<PAGE> 4
9.2. LAWFUL RATE OF INTEREST.
In no event whatsoever shall the amount of interest paid or
agreed to be paid to Holder pursuant to this Note or any of the Loan Documents
exceed the highest lawful rate of interest permissible under applicable law.
If, from any circumstances whatsoever, fulfillment of any provision of this
Note and the other Loan Documents shall involve exceeding the lawful rate of
interest which a court of competent jurisdiction may deem applicable hereto
("EXCESS INTEREST"), then ipso facto, the obligation to be fulfilled shall be
reduced to the highest lawful rate of interest permissible under such law and
if, for any reason whatsoever, holder shall receive, as interest, an amount
which would be deemed unlawful under such applicable law such interest shall
be applied to the Loan (whether or not due and payable), and not to the
payment of interest, or refunded to maker if such loan has been paid in full.
Neither Maker nor any guarantor, endorser or surety nor their heirs, legal
representatives, successors or assigns shall have any action against Holder
for any damages whatsoever arising out of the payment or collection of any
such Excess Interest.
9.3. CAPTIONS.
The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.
9.4. NOTICES.
Any notice, request, demand, statement or consent made hereunder
shall be in writing and shall be deemed duly given if personally
delivered, sent by certified mail, return receipt requested, sent by a
nationally recognized commercial overnight delivery service with provision for
a receipt, postage or delivery charges prepaid or by facsimile transmission
and shall be deemed given when postmarked or placed in the possession of such
mail or delivery service the day following or, if sent by facsimile
transmission, upon receipt, and addressed as follows:
If to Holder RH Investments Limited
c/o Unsworth & Associates
Herengracht 483
1017 BT
Amsterdam, Netherlands
Facsimile No. 011-31-20-623-2285
Page 24 of 60 Pages
<PAGE> 5
<TABLE>
<S> <C>
with a copy to: Goodman Phillips & Vineberg LLP
250 Yonge Street, Suite 2400
Toronto, Ontario
M5B 2M6
Facsimile No. (416)979-1234
Attn: Stephen N. Pincus
with a copy to: Manfred J. Walt
c/o Central Park Lodges Ltd.
175 Bloor Street East
South Tower
Toronto, Ontario
M4W 3R8
Facsimile No. (416) 323-3818
If to Maker: Balanced Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania 17055
Attn: Clint Fegan, Chief Financial Officer
Facsimile No. (717) 796-6150
with a copy to: Balance Care Corporation
1215 Manor Drive
Mechanicsburg, Pennsylvania 17055
Ann: Robin L. Barber, Esq.
Facsimile No. (717) 796-6294
with a copy to: Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburg, Pennsylvania 15222
Attn: Steven J. Adelkoff, Esq.
Facsimile No. (412) 355-6501
</TABLE>
or addressed as such party may from time to time designate by written notice
to the other parties.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Page 25 of 60 Pages
<PAGE> 6
9.5. TIME OF ESSENCE.
Time is of the essence for this Note and the performance of each
of the covenants and agreements contained herein.
10. SALE OF LOAN.
Holder, at any time and without the consent of Maker, may
grant participations in or sell, transfer, assign and convey all or any
portion of its right, title and interest in and to the Loan and this Note any
guaranties given in connection with the Loan and any collateral given to
secure the Loan.
11. CONSENT TO JURISDICTION.
MAKER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF PENNSYLVANIA AND IRREVOCABLY AGREES
THAT, SUBJECT TO HOLDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS NOTE OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. MAKER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. MAKER HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE
OF PROCESS MAY BE MADE UPON MAKER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO MAKER, AT THE ADDRESS SET FORTH IN THIS NOTE AND
SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
12. JURY TRIAL WAIVER.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS
RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY MADE BY MAKER AND BY HOLDER, AND MAKER
ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY PERSON ACTING ON BEHALF OF HOLDER
HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.
MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND HOLDER HAVE ALREADY RELIED
ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT EACH OF THEM WILL CONTINUE
TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. MAKER AND HOLDER
FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR HAVE
Page 26 of 60 Pages
<PAGE> 7
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
IN WITNESS WHEREOF, Maker has executed this Note or has
caused the same to be executed by its duly authorized representatives as of
the date first set forth above.
MAKER:
BALANCED CARE CORPORATION, a Delaware
corporation
BY /s/ Robin L. Barber
--------------------------------
Printed Name Robin L. Barber
----------------------
Its Senior Vice President and Legal Counsel
-------------------------------
& Assistant Secretary
Page 27 of 60 Pages
